Hewlett Packard Enterprise Company (HPE) recently announced a significant collaboration with Nvidia and Germany's Leibniz Supercomputing Centre (LRZ) to build the 'Blue Lion' supercomputer, a project poised to dramatically advance European scientific and AI research capabilities by early 2027. This move, involving a substantial EUR 250 million investment, positions HPE at the forefront of next-generation AI infrastructure, yet it unfolds against a backdrop of considerable regulatory uncertainty surrounding the company's proposed $14 billion acquisition of Juniper Networks, which the U.S. Department of Justice is actively challenging in court.
Strategic Focus on High-Growth Areas#
HPE has been strategically pivoting its business towards higher-growth, higher-margin areas such as Artificial Intelligence (AI), High-Performance Computing (HPC), and Edge solutions. This strategic shift is evident in recent operational performance. For instance, the company's Q1 FY2025 results, announced in May 2025, showed robust demand for servers, with sales increasing by +29% year-over-year, significantly driven by increasing AI workloads Seeking Alpha. This indicates that the market is responding positively to HPE's focus on providing the foundational infrastructure required for modern computing demands.
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Complementing its hardware strength, HPE's GreenLake edge-to-cloud platform continues to demonstrate strong momentum. In Q1 FY2025, GreenLake Annualized Revenue Run-Rate (ARR) reached $2.1 billion, representing a +45% increase year-over-year Seeking Alpha. This growth in as-a-service offerings is crucial for HPE's long-term strategy, aiming to provide flexible, cloud-like consumption models for enterprise IT, thereby securing recurring revenue streams and deepening customer relationships.
Furthermore, HPE is integrating sustainability into its core strategy, recognizing its importance for both environmental responsibility and business competitiveness. The company's 2024 Living Progress Report, released on June 9, 2025, highlighted milestones in decarbonization and responsible technology Business Wire. Initiatives include the adoption of energy-efficient technologies like 100% fanless direct liquid cooling, which are particularly relevant for power-intensive HPC and AI deployments. This focus on sustainability not only aligns with global environmental goals but also appeals to a growing segment of customers prioritizing eco-friendly solutions, reinforcing HPE's market reputation.
The 'Blue Lion' Supercomputer and AI Ambitions#
The announcement of the 'Blue Lion' supercomputer project on June 10, 2025, marks a significant milestone in HPE's HPC and AI strategy. The collaboration with Nvidia and Germany's LRZ underscores HPE's capability to deliver cutting-edge supercomputing infrastructure Reuters. The project is set to leverage Nvidia's forthcoming Vera Rubin architecture, which promises to combine advanced GPU and CPU technologies to achieve unprecedented computational density and performance.
HPE will deploy its next-generation Cray systems, known for their high-performance capabilities, integrated with direct liquid-cooling technology. This cooling solution is vital for managing the immense heat generated by powerful processors like those from Nvidia, ensuring operational efficiency and sustainability. The 'Blue Lion' is expected to deliver approximately 30 times the computational capacity of LRZ's current system, positioning it as one of the most powerful supercomputers in Europe when it becomes operational in early 2027 Reuters.
The strategic importance of the 'Blue Lion' project extends beyond immediate revenue. While the primary revenue recognition will likely occur closer to the 2027 operational date, the project significantly enhances HPE's credibility and visibility in the high-stakes world of AI supercomputing. Winning such prestigious contracts demonstrates HPE's technical prowess and ability to compete with rivals in delivering complex, large-scale computing solutions for scientific research, government agencies, and enterprise AI initiatives. This can serve as a powerful reference for securing future HPC and AI infrastructure deals globally.
Financial Performance and Trends#
Examining HPE's recent financial performance provides context for its strategic maneuvers. The company reported revenue of $30.13 billion for the fiscal year ended October 31, 2024, representing a +3.4% increase from $29.14 billion in FY2023 [Monexa AI]. This top-line growth, while modest overall, is influenced by strength in specific segments like servers (driven by AI) and GreenLake, potentially offset by softer performance in other areas.
Profitability metrics show some fluctuation. The gross profit margin was 32.68% in FY2024, down from 35.14% in FY2023 [Monexa AI]. This decline could be attributed to various factors, including product mix shifts towards lower-margin hardware or increased component costs. Operating income stood at $2.19 billion in FY2024, resulting in an operating margin of 7.27%, a slight improvement from 7.17% in FY2023 [Monexa AI]. Net income saw a significant increase, rising to $2.58 billion in FY2024 from $2.02 billion in FY2023, a jump of +27.36% [Monexa AI]. This boosted the net income margin to 8.56% in FY2024 from 6.95% in FY2023.
Here is a summary of key income statement figures over the past four fiscal years:
| Metric | FY 2024 | FY 2023 | FY 2022 | FY 2021 |
|---|---|---|---|---|
| Revenue | $30.13B | $29.14B | $28.50B | $27.78B |
| Gross Profit | $9.84B | $10.24B | $9.51B | $9.38B |
| Operating Income | $2.19B | $2.09B | $3.60B | $2.43B |
| Net Income | $2.58B | $2.02B | $0.87B | $3.43B |
| Gross Margin | 32.68% | 35.14% | 33.36% | 33.75% |
| Operating Margin | 7.27% | 7.17% | 12.65% | 8.74% |
| Net Margin | 8.56% | 6.95% | 3.05% | 12.33% |
| EBITDA | $5.02B | $5.06B | $4.78B | $4.85B |
| EBITDA Margin | 16.68% | 17.36% | 16.77% | 17.47% |
Source: Monexa AI, based on company financial statements.
Looking at cash flow, HPE generated $4.34 billion in net cash from operating activities in FY2024, a slight decrease of -1.96% from $4.43 billion in FY2023 [Monexa AI]. Capital expenditures were $2.37 billion in FY2024 [Monexa AI]. This resulted in Free Cash Flow (FCF) of $1.97 billion in FY2024, a +23.38% increase from $1.60 billion in FY2023 [Monexa AI]. The ability to generate substantial FCF is critical for funding strategic investments, managing debt, and returning capital to shareholders.
Capital Allocation and Shareholder Returns#
HPE has a track record of returning value to shareholders through dividends and share repurchases. The company's last declared quarterly dividend was $0.13 per share, with a record date of June 18, 2025, and a payment date of July 17, 2025 [Monexa AI]. This implies an annualized dividend of $0.52 per share, resulting in a dividend yield of approximately 2.84% based on the current stock price [Monexa AI]. The payout ratio stands at 47.41% of net income, suggesting the dividend is well-covered by earnings [Monexa AI]. While the dividend growth over the past five years is listed as 0% in the data, the consistent quarterly payments provide a steady income stream for investors.
In addition to dividends, HPE also engages in share buybacks. In FY2024, the company repurchased $150 million worth of common stock [Monexa AI]. This capital allocation strategy balances investments in strategic growth areas like AI and GreenLake with direct returns to shareholders, reflecting management's approach to balancing future growth with current value creation.
Balance Sheet Strength and Debt Management#
The strength of HPE's balance sheet is a key factor in its ability to pursue strategic initiatives and weather potential economic headwinds. As of October 31, 2024, the company reported a significant increase in cash and cash equivalents, totaling $14.85 billion, compared to $4.27 billion at the end of FY2023 [Monexa AI]. This substantial boost in liquidity provides considerable financial flexibility.
Total debt stood at $18.25 billion in FY2024, with long-term debt accounting for $14.81 billion [Monexa AI]. Despite the increase in total debt from $13.52 billion in FY2023, the large cash balance resulted in a net debt position of $3.4 billion in FY2024, a considerable improvement from $9.24 billion in FY2023 [Monexa AI]. This improvement in net debt is reflected in the net debt to EBITDA ratio, which improved to 2.38x TTM [Monexa AI]. The debt-to-equity ratio TTM is 0.73x (73.45%) [Monexa AI], indicating a reasonable level of leverage relative to equity.
The current ratio, a measure of short-term liquidity, was 1.29x TTM [Monexa AI], suggesting HPE has sufficient current assets to cover its current liabilities. Overall, the balance sheet appears solid, with ample liquidity to support operations and strategic investments, including the significant cash component required for the proposed Juniper acquisition.
Valuation and Market Perception#
Market valuation provides insight into how investors perceive HPE's current performance and future prospects. The stock is currently trading at a PE ratio of 17.63x based on its reported EPS of $1.04 [Monexa AI]. Looking ahead, analyst estimates suggest a forward PE ratio of approximately 9.76x for FY2025 [Monexa AI]. Other valuation metrics include a Price-to-Sales ratio TTM of 0.76x and a Price-to-Book ratio TTM of 1.02x [Monexa AI]. The Enterprise Value over EBITDA TTM is 11.41x, with a forward EV/EBITDA estimate of 5.02x for FY2025 [Monexa AI].
Here is a table summarizing key valuation and health metrics:
| Metric | TTM Value | FY 2025 Estimate | FY 2026 Estimate | FY 2027 Estimate |
|---|---|---|---|---|
| PE Ratio | 17.63x | 9.76x | 8.55x | 8.69x |
| Price to Sales Ratio | 0.76x | - | - | - |
| Price to Book Ratio | 1.02x | - | - | - |
| EV to EBITDA | 11.41x | 5.02x | 4.78x | 4.56x |
| Current Ratio | 1.29x | - | - | - |
| Debt to Equity | 0.73x | - | - | - |
| Total Debt to EBITDA | 2.38x | - | - | - |
| ROIC | 3.15% | - | - | - |
| ROE | 5.94% | - | - | - |
Source: Monexa AI, based on company financials and analyst estimates.
Analyst sentiment appears cautiously optimistic, with some initiating coverage with a